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If the Federal Reserve or the European Central Bank were to experience minor perturbations in the strength of their balance sheets, fiat money could cover them either immediately or through the retention of future seignorage.
Finally, many common fears of loss of reserve currency are overblown--the principle benefit to the United States is the interest savings associated with seignorage, and that amount is less than commonly believed.
His work in the area culminated in his The Great Debasement (1970) which would still be enormously valuable to many who write about seignorage and inflation taxes.
In this model, corporate tax is also significant, as are tariffs and seignorage (printing money).
The main economic cost of early euroisation compared to the currency board is the loss of seignorage revenue calculated at about 2 per cent of GDP in 2000 by Nenovsky et al.
This high cost not only includes the actual seignorage loss mentioned above but also includes opportunity costs such as any post-dollarization laws needed to ensure the proper functioning of the dollar economy.
Indirect effects include the loss of seignorage revenue as a consequence of the lower inflation brought by financial liberalisation, the revenue lost by governments from a disappearing so-called <<inflation tax>> (that is, the ability to repay investors in devalued currency), and the increase of governmental spending motivated by financial crises, which in the last few years have become recurrent in developing countries.
For example, developing countries rely little on broad-based taxes, and make substantial use of tariffs and seignorage as nontax sources of revenue.
Because the printing of money has long been a key aspect of state sovereignty, it is not surprising that most modern nation-states have emphatically embraced their right of seignorage, while richly endowing their banknotes and coins with national symbolism.
all seignorage (the money earned by the sovereign from issuing currency)
government earned approximately $5 billion in seignorage between October
In Zimbabwe, seignorage increased from three per cent of GDP in 2000 to average 19,5 per cent in 2001/2002, 15 per cent in 2003 and 17 per cent in the first half of 2004.